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Factors to Consider Before You Become a Wholesale Medicine Distributor

As the largest industry in the world, the pharmaceutical industry generates $1.3 trillion in revenue every year. As the prices of generic drugs rise, the competition for market share among wholesalers increases. If you are interested in becoming a wholesale medicine distributor, there are several important factors you should consider. These include the following:

License requirements for wholesale medicine distributors

Before you start a pharmaceutical or medical distribution company, it’s important to obtain the appropriate licensing. As a medical distributor, you’ll be required to have a wholesale drug license and a GST number. Both are issued by the district drug licensing authority, an office appointed by the state’s drug control office. You’ll also need to obtain a license if you’re planning to take on pharmaceutical distribution.

Depending on the state, the process to obtain a wholesale drug distributor license may take weeks or months. While the process to obtain a license is similar in many states, the requirements will vary slightly. Some require background checks, facility floor plans, proof of insurance, and the disclosure of operating officers. Some also require fingerprinting or surety bonds. In addition, some states require you to have a VAWD certification from the National Association of Boards of Pharmacies.

Generic drug price increases may squeeze wholesalers’ margins

While most generic drugs are extremely inexpensive in the U.S., increasing prices is putting more pressure on wholesalers, as these manufacturers can pass those higher costs on to the consumer. According to the Association for Accessible Medicines, 6 percent of products experienced price hikes of more than 100%. If you’re a wholesaler, it might make sense to consider buying generic drugs ahead of the price increase so that you can charge a higher price.

This is particularly true when it comes to large retail chains like Wal-Mart Stores Inc., which are increasingly exerting their buying power to secure lower prices for generic drugs. The price hikes may squeeze wholesalers’ margins, as their profits depend on the cuts they receive. Meanwhile, generic drug manufacturers are still waiting for the results of their bids to secure supply contracts with Wal-Mart Stores Inc. and McKesson. Teva anticipates that prices will fall by high single-digit percentages through the remainder of the year. The company had previously forecasted a reduction of 7 percent to 9 percent. But AmerisourceBergen is more optimistic, seeing price erosion of up to 9 percent.

Competition among wholesalers

The wholesale medicine distribution industry is an important element of the supply chain for prescription drugs. It is responsible for the distribution of most prescription medicines in the United States. It offers a range of services. Understanding how wholesalers operate can help policymakers increase the affordability of prescription drugs. Our analysis includes a literature review and interviews with experts in the field. Below we discuss some of the key issues that arise in the industry. To understand how wholesalers operate, we will first look at their pricing practices.

The industry is highly consolidated in most OECD countries, with three large pharmaceutical wholesalers controlling 90% of pharmaceutical distribution in the US. This type of competition is beneficial for both consumers and industry-level productivity because it forces “creative destruction” by forcing companies to innovate and replace outdated business models. However, a high degree of market concentration can result in higher prices. In contrast, a low level of concentration is beneficial to consumer welfare.

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